What is a quitclaim deed?
What are the elements of a quitclaim deed form?
How does it work in real estate transactions?
In this article, we will break down the notion of “quitclaim deed” so you know all there is to know about it!
We will look at what is a quitclaim deed, its meaning and definition, the type of warranty deeds possible, when are quitclaim deeds used, what are their characteristics, how they compare to general warranty deeds, their impact on mortgages, the elements of a quitclaim deed for and more!
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What is a quitclaim deed
A quitclaim deed (also known as a no-warranty deed or non-warranty deed) is a legal contract used to transfer the ownership of a real estate property where the seller (grantor) does not make any promises or warrants that to the buyer (grantee) that the title of the property is free and clear.
In other words, the buyer purchases the property without having any statements, declarations or promise by the seller as to the status of the property title.
Pretty much, no legal warranties.
Unlike other conveyance deeds, a deed of quitclaim will strictly convey the grantor’s “interest” in the property at the time the quitclaim deed is signed (whatever that interest may be).
In the context of quitclaim deeds, a real estate property is sold in the following manner:
- Seller makes no guarantees that it owns the property
- Seller makes no guarantees that the property title is free and clear of any liens and encumbrances
- Seller does not promise to indemnify or defend the buyer if a future title claim or a lawsuit is asserted against the buyer
The bottom line is that there are no warranties made by the seller with regards to the title of the property.
Quitclaim deeds are used as a means to strictly operate a transfer of legal interests in a property from one person to another.
No legal warranties or covenants are created to potentially result in a breach.
From a purely legal sense, if a seller did not have true title to the property, the buyer would not legally acquire a valid title under a deed of quit claim.
In fact, the seller sells or transfers the extent of title interest it has in the property (valid or not) without any guarantees of any kind.
If the seller had a valid title, then the buyer gets a valid title.
If the seller did not have a valid title, the buyer ends up with a worthless piece of paper!!
In essence, the buyer cannot file any type of title claim or recourse against the seller of a property sold quit claim.
Transacting a real estate property with an unknown party based on a quitclaim deed is very risky for typical property buyers.
However, transacting a quit-claim deed property with a family member or with people known to the buyer is more common (although precautions need to be taken).
Types of warranty deeds
There are different types of warranty deeds that a seller may grant a buyer:
- General warranty deed
- Special warranty deed
- Quitclaim deed or no-warranty deed
The general warranty deed provides full protection to the buyer relating to the title covering the entire life of the property.
A special warranty deed provides legal protection on the title for the period of time the seller actually owned the property.
A quitclaim deed or a quit deed proves no title guarantee or protection whatsoever to the buyer.
The least protective of the buyer rights on the title is a quitclaim deed (and the most favourable to the seller).
Quitclaim deed definition
What is quit claim deed?
In this section, we’ll specifically define quitclaim deed!
What is the definition of a quitclaim deed from a legal perspective?
According to Practical Law, quitclaim deed is defined as:
A form deed that transfers fee title and legal interests in real property from the grantor to the grantee.
In essence, a quit claim deed is a form deed the legal interests of a property from one person to another.
When to use a quitclaim deed
Why would someone do a quit claim deed?
Quitclaim deeds appear to be highly disadvantageous to buyers purchasing a real estate property like a house, land or type of estate.
However, quitclaim deed transactions do happen in certain types of real estate transactions, such as:
- Transactions between family members
- Property transferred between spouses
- Transfer of a property in the context of divorce
- Real estate properties transferred as a gift
- Parents transferring property to their children
- Removing or adding a spouse from a property title
- Transferring a personal property to a business entity such as a corporation or LLC
- Transferring property between legal entities like subsidiaries and affiliated companies
- Transferring a personal property to a living trust
- Property sold in a public auction following a seizure
- Property transferred as part of a succession or estate
As you can see, typically, quitclaim deeds are used in the context of a real estate transaction where no monetary consideration is being exchanged, between family members, in personal dealings or between companies within the same group of entities.
In such cases, it’s much easier for the grantee (transferee) to accept the title risk of getting a property without any formal warranties or covenants from the grantor (transferor).
A deed of quitclaim is also used, on certain occasions, to cure title defects (a process also known as clearing or “quitclaiming” the “cloud on the title”), such as:
- Correcting misspelled names on the title
- Correcting title documents to conform to state laws
- Cure defects in case signatures were missing
- Cure registration defects
Removing cloud on title is generally required by insurance companies looking to issue title insurance.
As such, quitclaims may not result in an important financial risk if you deal with people or entities that you know rather than unknown third parties.
Dealing with a party that you do not know, you should consult a legal professional or an attorney to understand the legal consequences of the transaction and risk that you will assume.
Characteristics of a quit claim deed
What are the characteristics of a quit claim deed?
Does a quitclaim deed give you ownership?
Essentially, when you acquire or purchase a real estate property on the basis of a quit claim or no warranty, you are assuming the title risk and assuming the risk going forward.
You are essentially getting the seller’s title interest as it appears at the moment of the sale.
Under a quit claim transaction, the seller assumes no legal liability for any possible claims that may exist against the property title.
Quit claims offer the lowest level of legal protection to buyers.
A quitclaim deed of warranty has the following characteristics:
- The seller makes no express warranties
- The seller does not guarantee to own the property title
- The seller does no statement about having received any third party title claims
- The seller remises, releases and quitclaims his or her interest in the property to the buyer
Without having a warranty of clear title, the buyer does not get any of the following warranties typically found in special and general warranty deeds:
- The grantor owns the property
- The grantor has the right to sell the property
- The property title is free and clear
- There are no mortgages registered against the property
- There are no liens registered against the property
- There are no other form of encumbrances registered against the property
Quitclaim deed vs warranty deed
What is the difference between a quitclaim deed vs general warranty deed?
In essence, in summary, a property sold “quitclaim” is a property sold without any warranties as to its title whereas a property sold under a general warranty deed comes with full legal protection on title covering the entire history of the property (whether the seller owned it or not).
A quit claim deed, by its nature, is not attractive to buyers.
If a seller has a perfectly valid title on the property and there are no past title issues, a property sold under a quit claim deed will not result in any title problems to the buyer.
However, when a seller in a commercial or residential transaction, is unable to make any promises or warranties on the title, it immediately leads the buyer to doubt that there may be problems with the property title.
This lack of certainty creates risk to buyers.
In many cases, a buyer looking to finance by a bank or lender will not be able to get a mortgage if the property quitclaimed.
Banks, mortgage companies and financing organizations will generally require a warrant deed providing full warranty as to title.
In addition to that, they may also require title insurance to be taken to provide additional insurance that should there be a claim by a third party, the title is insured under a suitable insurance policy.
Quitclaim impact on mortgage
Can I sign a quitclaim deed with a mortgage?
Quitclaim deeds are instruments used to convey an “as-is” title to the property from the seller to the buyer, it does not directly affect the mortgage.
Generally, such transactions are possible when the seller does not have any mortgage outstanding.
The banks and mortgage lenders typically require all their money to be paid off in the context of a sale or transfer by virtue of an alienation clause or due-on-sale clause.
If the entire mortgage outstanding becomes due on sale or transfer, then in many cases the sellers will not be able to easily convey the title (linked to the mortgage warranties).
However, in some cases, it may be possible to quitclaim a property when a mortgage remains outstanding, such as:
- The title to the property quitclaimed to the grantee but grantor remaining responsible for the mortgage
- The title of the property quitclaimed to the grantee where the grantee assumes the mortgage
- Title of the property quitclaimed to the grantee who co-signs on the mortgage with the grantor
It’s important to properly evaluate your options when dealing with a quitclaim of a property having a mortgage outstanding.
You may end up transferring your property to your former spouse (for example in the context of a divorce settlement) but end up remaining responsible for the mortgage as the quitclaim affects title only and not the mortgage deed.
Quitclaim deed form
Can I sell property with a quit claim deed?
You can, with a quitclaim deed form.
To transfer a real estate property with a quitclaim deed, you’ll need a quitclaim deed form which is a legal instrument or contract between the grantor and the grantee.
The quitclaim deed form is a document where you outline the terms and conditions of the quit claim transaction, such as:
Depending on the applicable laws in your state, the quitclaim deed form may:
- Only be signed by the grantor
- Need to be notarized
- Need to be signed by the grantee as well
- Need to also be signed by a witness
- Need to be delivered and accepted by the grantee
- Need to be registered with the County Clerk or Registry Office
You are advised to consult an attorney or use service providers offering you the right documents and process to follow.
Every state may have its statutory requirements for quitclaim deed forms to be valid.
Once you sign a quictclaim deed, you generally transfer the title to the buyer or grantee in an irrevocable fashion.
To avoid having to file lawsuits to revoke a deed of quit claim, you are better off consulting with a legal professional beforehand.
Protection against title defects
How can you protect yourself against title defects if you are buying a property without any warranties?
Essentially, there are two ways that you can protect yourself:
- Perform a thorough title search
- Get title insurance
A title search is the process of reviewing and assessing public property records to ensure the title is clear.
A lawyer or title company can perform a historical search and potentially uncover title issues.
If the title issues pose little risk, you may continue with the transaction.
If the title issues expose you to great risk, then you may back out from the deal.
As a layer of protection over and above the title search, a buyer can purchase what’s called title insurance.
Title insurance is a specific type of insurance policy providing protection against the risk of a possible title defect or third party claim against the buyer.
Insurance companies will generally do a thorough assessment of the property title such as:
- Engaging a title company to do a complete property history search
- Search past judgments
- Search liens registered in the past
- See any possible legal restrictions
- Perform a property survey to uncover potential encroachment issues
- Assess the easements on the property
The result of the title company’s research leads to the issuance of an abstract of title, a document outlining the property history, and title opinion, assessment of the property title.
If you are acquiring a property without any warranties that the title is free and clear of any defects or encumbrances, you may seriously need to consider title insurance to protect yourself against possible future claims and liabilities.
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